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Consolidating finances

Almost everyone may face the possibility that they become unable to make financial decisions or take care of their daily needs. Experts claim that the ability to make financial decisions generally peak when a person becomes 53 and further decrease after 60. Long-term care planning should include jettisoning and consolidating finances, oddly referred to as death cleaning, which can help guard against financial scams, poor judgment and unethical financial advisors.

Consolidating financial accounts allows for better monitoring of suspicious activities and duplicate investments and saves account fees. Older 401(k) and IRA accounts may be transferred into current employer plans. Various accounts should also be consolidated but FDIC insurance only covers $250,000 per depositor for each financial institution.

Individual stocks and bonds could be traded for managed mutual funds or exchange-traded funds managed by a professional. However, there may be tax consequences for investments held outside retirement funds.

Memory lapses can lead to missed bill payments which in turn results in late fees and a lower credit score that increases insurance and borrowing costs. A bank may set up regular recurring payments, bills may be routinely charged to a credit card and payments can automatically pay off the card balance each month. Overdraft protection of checks can prevent bounced check fees.

Credit card accounts should be restricted to one card for everyday purchases and another card for automatic bill payments. Accounts should be closed over time or when a loan is not needed to minimize harm to credit scores.

A power of attorney can appoint agents to make financial and health care decisions if a person becomes incapacitated. Back-up agents should be identified if the agent is unable to serve.

Important documents should be kept in a contingency or emergency file. A trusted person or heir should have ready access to these documents and contact information for a person's attorney, financial advisor and insurance agent. These documents should include a will or living trust, medical directives, power of attorney, living wills, military records, Social Security cards, titles and other ownership documents of major assets, deeds, insurance policies and certificates of birth, death and marriage. The file should also contain copies of passports, drivers, licenses and credit cards.

An attorney can help draft these documents and provide other estate planning options. This can help assure that person's wishes are carried out without confusion or litigation.

Source: USA Today, "Estate planning: How to 'death clean' your finances," By Liz Weston, NerdWallet, Dec. 29, 2017

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